How to Buy Gold As An Investment

By
Tim Plaehn
Updated March 28, 2017

Gold increased in value fivefold from 2001 to 2011.

Many investors view gold as a hedge against inflation and as a long-term store of value. The price of an ounce of gold increased from less than $300 per ounce in 2001 to over $1,500 10 years later. Buying gold in the form of bars or coins can lead to storage problems or high storage costs. An investor can boost his return from gold investing by choosing an investment method that minimizes the costs.

Step 1

Open an account with an online discount stockbroker if you do not already have a brokerage account. The gold exchange traded funds -- ETFs -- provide a low-expense way to invest in gold. To choose an online broker, refer to the "Smart Money" magazine annual broker survey for ratings and analysis.

Step 2

Review the current prices of the gold ETFs that own physical gold. Using the stock symbols for such ETFs, GLD and SGOL have share prices at approximately one-tenth the price of an ounce of gold. IAU and PHYS are priced at about 1/100th the price of an ounce.

Step 3

Calculate the number of ETF shares you wish to purchase, dividing your investment amount by the current share price of the selected fund. ETF shares are purchased in whole shares, so round off any fraction in the calculation.

Step 4

Purchase gold ETF shares using the trade screen of your online brokerage account. ETF shares are purchased in the same manner as stock shares. Enter the number of shares you want to buy and use a market order to buy at the current market price.

Tip

All four of the listed gold ETFs are backed by physical gold held by the fund sponsors. Other gold ETFs not backed by gold pose a higher degree of risk. The primary cost of gold ETF investing is broker commissions. The typical discount broker commission for share trades is $5 to $10. Gold ETFs can be used for either long-term investing or short-term trading on the value of gold.

Warning

Gold and the gold ETFs pay no dividends or interest. Gains or losses are dependent on the changing market price of an ounce of gold.